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I don't think making a lump sum payment now gets them out of any future periodic payments. My mortgage allows me to make additional ad hoc payments but if I make the equivalent of six monthly payments that does not relieve me of the obligation to make my next six payments. I would think the loan program allowance is for additional ad hoc principal payments rather than consolidating 12 semi-monthly payments into one semi-annual payment (6 into one quarterly payment - although that may be OK under 72(p) - but you are essentially changing the term of the loan). I would also see what the note says.

We talk directly to participants - a lot. Maybe it's not prudent but it saves a lot of time and it's what sponsors pay us to do. We try to qualify that we're not the Plan Administrator but probably aren't careful enough. If someone is an a-hole then we tell them they have to talk to the PA.

Bill Presson and Jpod, this seems like a reasonable common sense approach, given the amounts involved. Thank you everyone for all your insights and replies. Always appreciated.

Is the select group highly compensated employees? (If yes, then you will likely need contribution to some or all NHCEs to pass testing) Does the Plan document allow for varying rates of contributions to different employees? (If no, they you are dead in the water but you might be able to amend for future years.)